If you’re reading this, there’s a high chance that you are Googling “how to choose a good financial advisor?” or something to that effect. Understandably, when it comes to everything finances, it can get overwhelming and intimidating at some point, especially to the uninitiated. Well, you’re in for a treat because in this article, we will discuss what things to keep in mind in choosing a financial advisor.
Financial advisors perform many services, although the bulk of their work involves helping clients manage their money. Financial advisors can help you make your personal financial plan. Still, some financial advisors are specialized in retirement and estate planning, insurance needs, or tax preparation. Suffice to say, financial advisors help you make your financial dreams into a reality.
You might ask yourself, “Do I really need a financial advisor?” You can definitely get by without one but think of it like fixing a car. If you don’t have prior experience in fixing a car, especially a new one, you would not trust yourself with it right? You would want someone who is an expert at fixing cars. Similarly, you want to entrust your hard-earned money to someone who is an expert at managing it.
Let’s go back a bit to the car analogy. What if you have experience? You can fix your car for sure some just don’t have the time to do it. As you get older and hopefully, wealthier too, you would know that finances could get a little complicated. Keeping your finances in check requires many hours of research and learning and for some, it just isn’t worth the time and the effort. That’s where getting a financial advisor could help you.
How to pick the financial adviser for you?
Now that we’ve established the significance of financial advisors, the next thing you would like to know is how to pick the best fit for you. These are the things you want to put to mind and heart in picking a financial advisor:
1. Credibility
It’s best to go with a financial advisor that is certified. In the Philippines, you can find financial advisors who are certified by the International Association of Registered Financial Consultants. Those who were certified by the former earn the designation RFC.
Certifications do give an instant boost of credibility but it cannot speak of the same. The three letters after their name don’t guarantee their credibility so it’s best to ask around from your circle or from people in your life who are roughly in the same stage as you that can recommend you for a good financial advisor.
2. Experience
It’s important to take into account how long your potential financial advisor has been in practice. Someone who has years of experience in dealing with real-life financial situations might be the best person for you to put your trust in. Someone who also has experience in dealing with clients who come from different financial backgrounds would have diverse knowledge and can offer you better financial wisdom than someone who only caters to a particular group of people.
3. Pay Structure
Basically, there are two types of financial advisors according to pay structure or how they are paid by their clients. There are commission-based advisors who earn a commission whenever their clients buy or sell a stock or other investment. Then, there are those who are fee-based advisors who charge flat rates or charge by the hour, much like lawyers. Commission-based advisers may not be the most unbiased source of advice since they profit from getting you into buying the products that they offer.
If you’re someone who is just starting out and doesn’t have a lot of assets, fee-based advisors who charge by the hour could be the best fit for you, since your needs are fairly simple.
4. Compatibility & Time
Like your teachers in school, financial advisors have different styles and philosophies that they adhere to so see to it that the values you hold when it comes to money are compatible with your financial advisor. Moreover, some financial advisors cater only to high net-worth clients. You want one who will dedicate the time to focus on your concerns and is interested in growing with you. It is advisable that you “shop around” before you settle with the advisor that you’re most compatible with.
So there you go. By keeping these things in mind, you make sure that you get a financial advisor who acts in your best interest. It’s important to remember that getting the right financial advisor is just as important as the actual managing of your assets. Here’s to hoping you pick the best one!
Disclaimer: Just a reminder, dear reader, that the content in this column is my opinion only and should not be construed as investment advice because I am not your financial adviser, neither did I take into consideration your personal objectives, financial situation, needs or circumstances as your fiduciary. This column is mainly for your entertainment and education only.
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